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112_hr2_cboscore

112_hr2_cboscore

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Published by Darla Dawald

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Published by: Darla Dawald on Jan 11, 2011
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01/30/2011

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CONGRESSIONAL BUDGET OFFICE
Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 
January 6, 2011Honorable John BoehnerSpeaker of the HouseU.S. House of RepresentativesWashington, DC 20515Dear Mr. Speaker:The Congressional Budget Office (CBO) has reviewed H.R. 2,the Repealing the Job-Killing Health Care Law Act, as introducedon January 5, 2011. That bill would repeal the Patient Protection andAffordable Care Act (PPACA, Public Law 111-148) and the provisions of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152)that are related to health care. Both of those laws were enacted inMarch 2010.Among other things, PPACA and the provisions of the Reconciliation Actthat are related to health care will do the following: establish a mandate formost legal residents of the United States to obtain health insurance; createinsurance exchanges through which certain individuals and families willreceive federal subsidies to substantially reduce the cost of purchasinghealth insurance coverage; significantly expand eligibility for Medicaid;permanently reduce the growth of Medicare’s payment rates for mostservices (relative to the growth rates projected under prior law); impose anexcise tax on certain health insurance plans with relatively high premiums;impose certain taxes on individuals and families with relatively highincomes; and make various other changes to the federal tax code, Medicare,Medicaid, and other programs.CBO has not yet developed a detailed estimate of the budgetary impact of repealing that legislation, although it is working with the staff of the JointCommittee on Taxation (JCT) to complete such an estimate in the nearfuture. Because Congressional deliberations on H.R. 2 could begin verysoon, CBO is providing in this letter a less-detailed preliminary analysis of that legislation. CBO and JCT estimated that the March 2010 health carelegislation would reduce budget deficits over the 2010–2019 period and in
 
Honorable John BoehnerPage 2subsequent years; consequently, we expect that repealing that legislationwould increase budget deficits.The projected increase in deficits will not be exactly the same as thereduction in deficits that was originally estimated to result from the enactedlegislation. As will be discussed in the detailed estimate that isforthcoming, a number of developments have occurred since CBO and JCTproduced the cost estimate for the March 2010 legislation (shortly before itwas enacted). In particular:
 
The original estimate was based on the projections of economicconditions, health care costs, federal spending and revenues, andother factors that CBO published in March 2009. The economicoutlook is now somewhat different, and CBO has made a number of technical changes to its spending and revenue projections related tohealth care programs.
1
 
 
Some of the funding provided by the legislation enacted last Marchhas been obligated or spent, and some regulations implementingaspects of that legislation have been promulgated. The budgetaryimpact of repealing that legislation depends on the extent to whichrepeal would affect those actions; because an estimate of repealwould assume enactment around the end of this fiscal year, nosignificant budgetary effects would occur in fiscal year 2011.(However, such effects would occur if H.R. 2 was enacted wellbefore the end of the fiscal year.)
 
Subsequent legislation has already modified the laws enacted lastMarch. Specifically, the Medicare and Medicaid Extenders Act of 2010 (P.L. 111-309) increased the amount that could be recoveredfrom enrollees in insurance exchanges whose actual income in a yeardiffered from the figure used to determine their tax credit for healthinsurance premiums. That legislation was estimated to reduce net
1
For example, in
The Budget and Economic Outlook: An Update
that was published in August2010, CBO noted that identifiable changes in the estimated effects of some of the provisions of thelegislation had reduced projected outlays over the 2010–2019 period by about $11 billion andincreased projected revenues by about the same amount (see Box 1-1 on page 6). For manyaspects of the legislation, however, distinguishing the effects of economic and technical updateson the budgetary impact of PPACA and the Reconciliation Act from their effects on theprojections that would have been made under prior law is difficult. Therefore, developing thebaseline projections in August did not automatically result in an estimate of the effect of PPACAand the Reconciliation Act under the economic and technical assumptions of that baseline.
 
Honorable John BoehnerPage 3federal payments for subsidies through the health insuranceexchanges.
 
The original estimate covered 2010 through 2019, the period usedfor Congressional budget enforcement procedures when thelegislation was being considered (in calendar year 2009 and early2010). CBO has nearly completed new baseline projections through2021 that will be published later this month. As a result, CBO’sestimate of the budgetary effect of repealing last March’s legislationwill cover a later period than that spanned by the original estimate.The changes noted above will affect many elements of a detailed estimateof the impact of H.R. 2, but they will probably not have a major effect onthe overall budgetary impact of the bill through 2019. Moreover, in itsongoing monitoring of developments, CBO has seen no evidence to datethat the steps that will be taken to implement the March legislation—or theways in which participants in the health care and health financing systemswill respond to that legislation—will yield overall budgetary effects thatdiffer significantly from the ones that CBO and JCT projected earlier. As aresult, for the 2012–2019 period, the forthcoming detailed cost estimate forH.R. 2 will probably not differ substantially from the result that would beobtained by reversing the signs of the net changes in deficits that wereshown in the cost estimate for PPACA and the Reconciliation Act that CBOissued on March 20, 2010.
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 The remainder of this letter describes—in broad terms and on a preliminarybasis—CBO’s assessment of the effects that repealing PPACA and therelevant provisions of the Reconciliation Act would have on federal budgetdeficits, the federal government’s budgetary commitment to health care, thenumber of people with health insurance, and health insurance premiums inthe private market. (Repealing the provisions of that legislation would alsohave a variety of other effects on the health care and health insurancesystems that this letter, like previous CBO cost estimates, does not address.)
2
See Congressional Budget Office,letter to the Honorable Nancy Pelosi about the budgetaryeffects of H.R. 4872, the Reconciliation Act of 2010 (March 20, 2010). That letter and the otherCBO documents cited in this letter are available on CBO’s Web site (www.cbo.gov) and arecontained in CBO’s December 2010 report
Selected CBO Publications Related to Health Care Legislation, 2009–2010
.

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